IoD – November data suggests impending recession now part of business mindset

The IoD Directors’ Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, fell to -64 in November, the second lowest figure on record (after the -69 registered in April 2020). In October 2022, the Index recorded a value of -60.

The index of confidence in business leaders’ prospects for their own organisations also dropped back to +18, from +25 in October.

UK (64%) and global (46%) economic conditions are the factors most cited by business leaders as having a negative impact on their organisations. Other factors include business taxes (37%), cost of energy (36%), skills shortages (34%) and the UK’s ‘new trading relationship with the EU’ (34%).

In terms of the outlook for their organisations:

  • 47% of business leaders expect higher revenue in the next 12 months (28% expect lower), down from 54% in October
  • 25% expect higher business investment (25% also expect lower), down from 29% in October
  • 27% expect higher employment (16% expect lower), down from 34% in October

Of the 74% of members who said they were pessimistic about the prospects for the UK economy, 30% gave ‘the rate of inflation in the UK’ (up from 20% in October) as the main reason, whereas those who cited ‘political instability in the UK government’ fell to 27% (from 49% in October).

Kitty Ussher, Chief Economist at the Institute of Directors, said:

“The reality of an impending recession is now part of the mindset of British business leaders. A massive two-thirds of our members are now citing ‘UK economic conditions’ as having a negative impact on their business.

“The austere tone of the Chancellor’s Autumn Statement, combined with gloomy official forecasts, have cemented views of a negative economic outlook, pushing our Directors’ Economic Confidence Index down to within touching distance of levels last seen at the beginning of the pandemic. However, political instability itself as a contributor to the negative economic mood is less than in the immediate aftermath of the mini-budget, although it still remains on a par with inflation as a reason for economic pessimism.

“Looking forwards, we don’t expect much relief in terms of the prevailing mood. A turning point might come when the rate of inflation starts to fall back, if it leads to a sense that we are through the worst, but our data shows business leaders don’t expect that to happen until well into next year – at the earliest.”